Posted
by
timothy
on Thursday May 19, 2011 @12:58AM
from the b-b-but-the-feds-are-here! dept.

An anonymous reader writes "There's a popular discussion happening at the Bitcoin forums about a new browser-based bitcoin minerreleased today. This lets people mine for bitcoin straight from the browser. There's talk of making an embeddable version. How long until websites start using CPU power from their users to create Bitcoin for their owners?" As Bitcoin gets more attention, I foresee malware with payloads promising to do the same thing.

Hijacking the thread to point a major flaw of Bitcoin: It's an inherently deflationary currency. Because it aims to be 100% distributed, there's no central mint that controls the bitcoin supply. To prevent inflation, the system is designed with a hard limit [wikipedia.org] on the total amount of coins in circulation. This means that "mining" for coins will be get progressively harder until it will become virtually impossible to find new coins.

The engineers behind the project might not see deflation as a flaw, but an economist most likely does. The immediate consequence is that when bitcoins start to be traded in the real world for goods and services, the relative value of a coin will increase. If bitcoins gain popularity and their penetration increases by say 20% a year, the market will quickly attract speculators who will see hoarding of bitcoins as a high return investment, and they will hold on to those bitcoins for as long as the high returns will continue. As with any deflation, this will create artificial scarcity of money and halts economic trades: deflationary money "do not want" to be spent. Of course the high returns are nothing more than a bubble that will burst at some point, and the market becomes engulfed in coins from investors wanting to make an exit. The cycle could then resume - but of course other speculators will try to ride the bubble making the value of a bitcoin highly speculative and random.

The penetration of bitcoins in the real economy will undoubtedly be hampered by it's widely fluctuating value, and it will create an opportunity for speculators to extract undue profits from honest economic agents. An online store will be unwilling to sell for bitcoins inventory that was purchased for dollars for fear that it might not recoup his costs at tomorrow's bitcoin parity.

As much as I like the idea of a distributed and truly democratic currency, I don't think bitcoin is it, even assuming all other technical aspects are flawless. An effective currency must not be deflationary, and the money supply must expand with the size of the underlying economy - this is a key role that the central bank plays in almost any country. Any engineer looking into creating a new currency should understand this undertaking is essentially an economic feat, not a technical one, and should consider Keynes' General Theory as mandatory reading.

It costs us (activegrade.com) about 3% to accept dollars, and about 0.7% to accept bitcoin. I can't afford to hoard bitcoin - I turn them into dollars right away.
So far, this hasn't been a myth - I have actual dollars, and saved 2.3% getting them.

The illusion is that it's not a pyramid scheme for the creators and early adopters. The mailing list in-crowd creates a few million easy coin first (out of a total of 6.2 million coin currently created, total market cap $49 million), then opens up the service for speculators. The speculators drive up the exchange value against real currency and the original 'investors' cash out their imaginary bits.

It's like how an IPO makes the original owners wealthy [nytimes.com] on the back end - they sell 49% of the company and keep a majority stock themselves that they can divest under the radar at a later higher market valuation. The only difference is there's no immediate cash infusion from the IPO and there's no company.

Any doubts about the cashing out of early adopters that made cheap and easy coin (bitcoin launched 10 months ago, when did you first hear about it?), go to the exchange [mtgox.com] and click on depth-of-market. There are several sellers offering lots of 1000+ coin (at $7-8 each). Clearly the winners are those who got in early, either mining with no competition or buying the currency eight months ago for 1/100 of it's current value...

Each hour approximately six computer in the world win a prize of 50 coin (based on cpu

What would cause deflation in BitCoin if it took off? If anything, if BitCoin were to take off in a major way there would be massive inflation (inflation in the sense of value of BitCoin to other currencies, i.e., instead of costing $7 for a bitcoin, it would now cost $70)

Yes, which is deflation from the perspective of someone holding bitcoins. The value of bitcoins rises, massively, people hold on to bitcoins instead of spending them because they'll be worth more later, the value then rises further due to scarcity, causing a feedback loop.

Sure, these sorts of things have a limit, somewhere. I'm not quite sure how the people at bitcoin think this is going to work though.

Ahh, you are correct. I did not think about that, and something like that is happening at the moment. When I got into bitcoins a few months ago, the cost was about $.80 per bitcoin, and had been stable for some time. I took a vacation and came back and all of a sudden the prices went up to $4 and then $5, hit $8 and are now in the $7 range. I feel dumb for having spent bitcoins previously.

So it is possible that bitcoins will lose their main function, to act as a currency for exchange, and will become pur

So image when a guy who owns a lot of bitcoins decides to suddenly dump them on the market. Sudden inflation. So another guy does the same to protect his investment (ie: by buying a more stable investment). More inflation. So a third guy does it. Rinse and repeat. Probably 90% of it being done by automated scripts.

Yeah, bitcoins are no currency because there's no real market linked to it. There are no people only accepting bitcoins.Bitcoins are more like gold, except that instead of mining them, you "mint" them. And of course, unlike gold, they cannot be used for anything if they lose their monetary value. Gold at least can be used as great conductor and for tooth crowns, or if all else fails, it still has decorative value.

I just started reading up on the BitCoin infrastructure and it's quite fascinating. I have some education in economics, but economy is not my main field, so cut me some slack. From what I understand, this shouldn't be a problem and here's why I think so.

While what you're saying is true for "real" economy, it's quite different for BitCoin. When someone's suddenly dumping a lot of currency, greatly devaluating it, you have a reason to believe that this currency suddenly became less scarce. (Alchemists discove

What would cause deflation in BitCoin if it took off? If anything, if BitCoin were to take off in a major way there would be massive inflation (inflation in the sense of value of BitCoin to other currencies, i.e., instead of costing $7 for a bitcoin, it would now cost $70)

There is a finite supply of BitCoin, specifically 21 million, more than half of which have already been mined. Let's say each BitCoin is worth 1 USD, so the total money supply of BC is equal to 21 million USD. Now let's say the BitCoin

Basically, it would have been nice if the people who invented BC had taken Econ 201 or any sort of engineering class dealing with control theory.

Good luck with that. Their view on economics is based on a single to them unshakable view:

Everything the government and federal reserve do is evil, counterproductive and without any redeeming value.

As a result a fiat currency must have no advantages or reason for existence except to oppress the people. The gold standard must be superior in all ways. And if the gold standard is superior then something like bitcoin must be even better.

That is monetary deflation relative to other currencies; that is, each unit of money (e.g. bitcoin) has become more valuable, and prices correspondingly drop (price deflation). Inflation is the opposite: prices rise, currency becomes worth less per unit.

Monetary and price inflation / deflation are often related, but not always. For example, computer processors have had prices fall due to technology, not because the dollar is worth more. Conversely, a civil war in, say, Saudi Arabia would make oil prices (and many others) rise.

Both monetary inflation and deflation can have positive and negative effects depending on the individual. With deflation, money becomes more valuable over time, so savers accumulate money simply by holding it. No risky investment needed. Debtors, on the other hand, see their debts grow over time. There is a push for less spending and more saving as it makes more sense in this environment. Consumers may hoard cash.

Inflation on the other hand means money loses value over time. Debtors see their debts lessened over time, while savers must invest to break even over the long run. In this environment, there is more spending and less hoarding. More risky investments are needed to make the same real (adjusted for inflation) return.

This ignores interest rates and the like, fractional reserve banking, etc. because I don't think I have a solid grasp of economics beyond this much (assuming I made no mistakes, here's to hoping)

The scarcity of bitcoins depends on cryptographic principles - there are no more than ~21 million bitcoins that can potentially exist, regardless of how hard 'miners' work to discover them.

Is it really cryptographically guaranteed? From what I heard, it seems it's merely agreed upon by the majority of bitcoin users. They agree on the speed with which new blocks are produced (adjusting the difficulty required for a block to be accepted), and they agreed that after a certain number of blocks, the number of bitcoins rewarded for mining a block will halve. Blocks need to be accepted by the network in order for related bitcoins to be accepted as currency, but technically, it sounds like the network could simply change their agreements, and more bitcoins could be allowed to exist.

Suppose bitcoin gets a huge influx of new users who don't like the idea that all money has been mined (and possibly hoarded) by the early adopters. They agree to increase the mining rate and the reward. If there's enough of them to outnumber the old bitcoiners (let's say that China switches to bitcoins and distributes its own bitcoin software), wouldn't that have an impact?

...and how has that economy been created? What, exactly, have merchants been told that has convinced them that Bitcoin currency has actual value?

An economy is created through individuals specializing, trading with each other, and investing the resultant savings. Merchants haven't been "told" anything other than the Bitcoin exchange rate, which they can easily see for themselves [photobucket.com] just as with any other currency.

Probably merchants see a growing community around it right now, and are willing to take some risk now, betting on the future value of the currency, in order to profit in the future. Which is exactly what an entrepreneur is.

I just finished up a property class in law school. Way back in the day, people thought it nuts to purchase or transfer rights as opposed to a real, tangible thing like, say, gold. For instance, rights to land. You can't transfer land, I can't pick up my little corner of the earth and carry it over to you, only plate tectonics can do such a thing. So, people came up with "enfeoffment:" When I sell you land, I gotta hand you a clump of dirt, or a handful of wheat, or put your hand on the door to the house or somethin' weird like that.

To me, smells a lot like the fear of fiat money. All you guys are just scared to transfer rights, or in this case, a measurement of the value of your services/wealth.

That simple. Money doesn't have to be tied to shit, just like an estate.

If you're interested and not a member of a Commonwealth country or derivation thereof, take a look at estates in land under the English fuedal system after William the Conqueror. Owning a piece of land is a lot more complicated than you would expect.

Bitcoin doesn't have any value. It's an economic in-joke along the lines of the great spaghetti monster. Some folk simply choose either to believe, or appear to believe. They're not hurting anyone, so best to leave them to it.

1. The former is outside the context. Bitcoin in and of itself doesn't deal with fractional reserve banking.

2. That kind of transaction shuffling doesn't add much in the way of work really. The transaction list in a block is only hashed once, then that hash is included in the repeating hash calculation, which cycles millions/billions/trillions of times before a valid block is found.

3. Amount of value added is not fixed. It decreases over time, specifically every 210,000 blocks (about every 4 years. It'l

1. The former is outside the context. Bitcoin in and of itself doesn't deal with fractional reserve banking.

Well that's my point. Major currencies have a central bank which implements the fractional reserve. Bitcoin by design has no central bank and thus no fractional reserve.

2. That kind of transaction shuffling doesn't add much in the way of work really. The transaction list in a block is only hashed once, then that hash is included in the repeating hash calculation, which cycles millions/billions/trillions of times before a valid block is found.

There are two problems with the highspeed wash transactions. First it generates large numbers of events that have to be propagated across the whole network. (bitcoin requires all nodes know about every transaction). Second, every transaction causes a work event that generates new bitcoins. Not only can the bots compete for those new c

The same thing that happens in the normal banking system. it's called a "run on the bank" and if the bank can't borrow money to pay off the debts it collapses. We just count on that not happening. that is not everyone takes out there money at once. When it does happen the appropriate agencies step in and seize the bank. the assets (the loans) get sold to a larger bank with sufficient reserves to cover the withdrwals. The FDIC sweetens the deal to make it worth while for the other bank. Because of the

No. gold has value because we make things from it. It's a metal with unique properties, not just beauty. Semiconductors depend on gold. Our civilization (as we know it today) depends on semicondcutors.

BTC is simply a virtual good made from semiconductors. It is three degrees separated from actual value.

It would be great if something like this took off, and nothing ever will if people don't try. But the thought of using a web browser to mine BTC is pretty ridiculous: I ran the java applet 24/7 for weeks on a

Gold's value goes back long before it's practical use. It's been a valuable trade good since prehistoric times. It's only use then was for jewelry, and the reason it was used for jewelry was because it was so distinctive and expensive. That made it a very good way to show off wealth. It's very high value-to-size ratio and nonperishability also made it good as a pre-currency.

And this is why I hate BitCoin. When I saw their model I just shook my head. Bitcoin is just as biased as say gold or whatever else is supposed to be the good currency. For example who wins with a gold hardbacked currency? Any country that happens to have a motherload of gold on their lands. Who loses? Anybody who doesn't have gold on their land.

The same goes for BitCoin, it is the geeks that win, but I guess that the nature of this beast. BitCoin is tilting it in the favor for themselves the "underapprecia

It'd obviously be more valuable if someone threatened everyone else into using it. The US government, and governments of every other country, do just that in order to prevent the appearance of alternative currencies as a form of tax evasion.

That's where they'll get you. Or Visa/Mastercard will stop processing for wherever bitcoin.org is hosted after a friendly call from a Senator.

Bitcoin.org could be lawyered right off the face of the Earth and it wouldn't make any difference. You'd still be able to trade BTC for USD (or vice versa) with any of the thousands of other Bitcoin owners. It's all P2P, remember?

When this came up a couple of days ago I didn't see anyone link to this for some reason (or I missed it).

The podcast called Security Now featuring Leo Laporte and Steve Gibson (famouse for that the "Shields Up!" web page) dedicated episode 287 entirely to bit coin.

I thought steve gave an incredibly well thought out, clear, concise explanation of what bit coin is why it is apparently impossible to "game" the system in anyway. The following episode (288) was the "listener feedback" episode with many listeners expressing doubt and even more excellent explanations from Steve.

Here are the convenient transcripts of these episodes, linked here in the hopes perhaps it will be useful to the slashdot community.

The system has already been "gamed" by its very creator and a handful of early adopters. They mined most of the bitcoins currently in existence and then they made people believe in their value and became millionaires. (Satoshi is said to own between 1 and 2 million bitcoins, that's between $7M and $14M at current market prices.) Regardless of the usefulness of the idea itself, bitcoin was also designed to be a get rich quick scheme. You could conceive a similar digital currency, where wealth distribution was not so heavily biased towards early adopters.

There's an intrinsic value to a currency which is hard to trace and hard to tax and liquid across international borders. Satoshi engineered a nice exit strategy for himself. I don't know why you call it "gamed". It's a damn sight more clever than anything Bezos ever patented.

Most of Satoshi's personal profits will ultimately come from the robber barons of the black economy, such as Nigerian 419 scammers. Is that a bad thing? For pillaging the Philippine nation, there's the Swiss banking system; for everything else, there's Bitcoin.

I know this is a bit too abstract for many, but an accurate and reliable and relatively private score-keeping system is an intrinsic good in human affairs. It doesn't need to be backed by any other form of value.

I'd have to agree here. I'm a big supporter of Bitcoin, but this isn't news. People make new mining clients all the time; this one just happens to be a Java applet embedded in a web page. Interesting, but certainly not front-page newsworthy.

That site is also utilizing much more efficient GPUs to do the mining, as opposed to relatively inefficient (and power sucking) CPUs. An 8800GT GPU draws 100 Watts less power to do four times the work of a Phenom X4 9850.

Site uses only CPU mining, and I can guarantee you that you will be spending more on electricity than gaining in bitcoins with the current valuation. You need a powerful GPU or some other specialized hardware to do it profitably. It's cheaper and easier to just buy bitcoins.

That said, if it works as a steppingstone for you to get interested in Bitcoin, and actually familiarize yourself with the system, before coming to the wrong conclusion about its validity, then go for it.

Thanks for your insightful post. As someone who's researched bitcoin (and who should have put that $500 in at the $.20 mark...) I find your post to be the only one so far that actually gives some context about this development and what it means to bitcoin, both to those new to the concept and for those who have been out of the loop for over a year. I'm certainly no expert, but I know enough that I was hoping an explanation like yours would show up earlier in the discussion for those who might not know about

I can guarantee you that you will be spending more on electricity than gaining in bitcoins with the current valuation.

Doesn't that assume that one's PC would be turned off otherwise? If it's just idling - especially if it's a powerful box - it still drains quite a lot. Would BitCoin minting really cause that much extra power use to cost more than the value of minted coins?

If you know of a more energy-efficient method to enforce scarcity, let's hear it. The traditional method (establish and maintain a judicial system and police force to catch and punish counterfeiters) isn't exactly low-overhead either.

Paper is a renewable resource, gold provides a usable end product with intrinsic value. If you're running a non-fiat currency, these things are used to back your money. Bitcoin? What useful product does "mining" provide, to actually give the bitcoin value?

I can understand if you were to get bitcoin credits for providing a useful product/service/processing, but processing for the sake of it simply to slow down bitcoin inflation seems brain damaged to me.

Cash: paper lasts a few years at best, coins are worth less than the metal they're minted from, armored vans for transport and entire law enforcement departments dedicated to counterfeiting

I've handled plenty of bills that are as old, or older, than I am. Paper currency gets a little more than a 'few years'. You don't see a big recovery effort until the denomination gets redesigned to be harder to forge (making the older bills less desirable, though equal in value in commerce), so many of the older bills remain in circulation. Not everyone beats up their money in the literal sense.

the average life span of a dollar bill is less than 2 years according to http://www.enchantedlearning.com/math/money/bills/one/ [enchantedlearning.com], sure not everyone beats up their money but very few people take care of it, though i suppose larger notes would probably last longer.

For some reason, the only way I can analogize bitcoin to people is "it's what you'd get if you explained Star Trek's energy credit system to a stoner, who then ran for US congress and implemented it." I write science fiction constantly and would be hard pressed to come up with a zanier scheme.

Said stoner, if in the Star Trek universe, would somehow manage to spew out a string of words that would cause these words to be uttered: "Self-destruct sequence has been activated. Ten minutes until antimatter core overload.'.

Both as a technical concept and as a social phenomena. Quite a lot of people using Bitcoin are not doing so for practical benefits.. they're installing the software and promoting the concept as a sort of protest against the fiat banking system. Oh, and because they hate paypal.. but that's mutual.

That's a pretty interesting article.. and it demonstrates the power of portraying yourself as persecuted to attract new members.

However, I think they're pretty delusional about the robustness of the system. From the paper that started it all:

If a greedy attacker is able to assemble more CPU power than all the honest nodes, he would have to choose between using it to defraud people by stealing back his payments, or using it to generate new coins. He ought to find it more profitable to play by the rules, such rules that favour him with more new coins than everyone else combined, than to undermine the system and the validity of his own wealth.

This obviously assumes the attacker is interested in profits that can be extracted from the system. An attacker who is already wealthy, and has a greater interest in undermining the system than extracting profit from it, can trivially overwhelm the network by assembling processing power - especially if the attacker already has a stockpile of processing power.

National governments obviously fall into this category, so if they ever decide to destroy Bitcoin they won't need to issue any bans or even tell anyone.

I'm sure you can think of some other potential attackers who have the capability.

I think that the system as implemented restricts the speed at which new coins can be created, so the "attacker's" second option is not available. I don't know enough about this to say anything about the first option.

This obviously assumes the attacker is interested in profits that can be extracted from the system. An attacker who is already wealthy, and has a greater interest in undermining the system than extracting profit from it, can trivially overwhelm the network by assembling processing power - especially if the attacker already has a stockpile of processing power.

Usually, the cost of destroying something is much cheaper than creating it. That's why terrorism can work. The cost of attacking is not that large

Still the only 2 things any attacker can do is mine bitcoins, and attempt to double spend their existing coins. Your coins are cryptographically safe, and cannot be stolen from you. If you accept bitcoins as payment, you will find our reasonably quickly if an attempted double payment has occurred. If you hold any goods in escrow for a while you should be ok.

What can I buy with bitcoins? Food, housing, software anything? For the articles it looks like you can trade US dollars for bitcoins and bitcoins for us dollars. And that the $7.70 you put in two days ago is worth $7.10 today.

For the articles it looks like you can trade US dollars for bitcoins and bitcoins for us dollars. And that the $7.70 you put in two days ago is worth $7.10 today.

Same as with any other currency, the rate goes up and down - but historically, it has gone up more than down [mtgox.com], so if you had bought bitcoins three years ago and kept them around, you'd get 10x as much as you paid by selling them today.

I don't know how you can call a retard to someone who does not want to risk to speculate with a good that he thinks is doomed to fail. In my book that is just coherent: BTC bad idea ---> Do not buy BTC.

But hey, why are you so nervous about it? Being a wise-I'll get rich gambling-guy? Or is that you just need to sell your BTC? No need to be so angry when you have got such a good deal and had your time to get all the BTC you want. Hey, you can take my share of them, if you want.

So Bitcoin is basically a mechanism for converting electricity into an asset which is worth less than the cost of the electricity used to produce it, and which can only be used in trade with other people who are stupid enough to have not thought this through? I think I'll pass.

Don't think of it as printing money, think of it as investing in stock. You're "purchasing" a commodity which in the future will become scarce. It may be a desirable commodity, it may fall flat on it's face. Remember, however, that all things are worth as much as the value people attribute.

I don't see enough people ever taking it seriously enough to matter. I ignored BitCoin entirely for a year, simply because they did such a poor job of explaining (in user-facing content, at least) just exactly what the fuck the clients were doing and the fundamentals of the process. You can watch their promotional video, which amounts to "install a client that does magic and makes money appear".

The reason I ignored it for over a year is that it just instantly hit me as a garbage. As a scam. As those companies that used to ask you to install a client that would do distributed work and would pay you for your CPU usage, but never really actually accomplish enough work per user to ever bet any money back (especially when counting the energy your system used to do the work). With this, the starting user is left wondering "okay, what am I doing? is my client doing computational work that is being sold by bitcoin to companies and institutions and they're giving my bitcoins in return for that?" but you never really know, until you start digging around in white papers - which most users aren't going to do.

And if you check out the forums, there's even more scammy sounding things. Like advertising sites that sell pre-built computers made just for running your own bitcoin farming machine. Or guys offering to contract to you for a certain amount of work, etc, etc. It all just rubs even the experienced person as shady and scammy. You really have to overcome a lot of mental hurdles to stop and give it a real look.

I've been seeing bitcoin mentioned here and there for a few weeks now.

With this FA, I've been introduced to the concept of "mining" Bitcoin. (It seems I'm a few months late, perhaps -- and yes, you can get off my lawn.)

Which, I must say, is interesting -- if people are willing to pay for it.

But in my own preliminary experience, I will generate two 10,000ths of a bitcoin per hour on my Intel Core2 Quad Q6600. (I found it interesting that all 4 cores were appropriately maxed out with in-browser Java, and that the system still seemed as responsive as always.)

But that's for my years-old CPU, which everyone seems to agree is the wrong way to mine Bitcoin. And while I can harness my GPU(s) to do the work considerably faster, given appropriate kit, here's something I've been so far completely unable to figure out:

What in the fuck are these cycles being used for? Is there some problem being solved? Is it just a measure of masochistic tolerance? What's going on here?

What in the fuck are these cycles being used for? Is there some problem being solved? Is it just a measure of masochistic tolerance? What's going on here?

It's basically trying to generate a block of data such that the hash is not less than the current (network-wide) difficulty value. So it is a "problem solved", but it does not carry any inherent utility outside of BitCoin. The only point of making you do this work is so that it can be later be verified that the coin was indeed generated by doing the work, and not conjured out of thin air (thus keeping the total supply at check).

What in the fuck are these cycles being used for? Is there some problem being solved?

Yes: put simply, the problem being solved is generating authentication codes for transactions that require enough CPU time to generate that it's infeasible for an attacker to generate them themselves. On a technical level, you're searching for random numbers that can be added to a transaction list and the hash of the last transaction list block which makes the SHA256 hash match a certain pattern.

Basically, BitCoin network is a big transaction database.One transaction is: "transfer X amount of BitCoins from account Y to account Z." This 'database', or transaction log is replicated and stored on all participating users' computers.You can be sure a (your) transaction has been recorded, because you can check with many other peers who will verify that it is.

Of course, the inner parts are more complex, and there's a way to generate new BitCoins (but over time you can generate less and less, so it's a finite amount in total).

The few people who found out about bitcoin back in 2009 were able to mine a very significant percentage of all the bitcoins that will ever be created, just because there was no competition yet (back then you could create a block with on average 4 billion sha-256 hashes; now it's about a quadrillion). If they hold on to their bitcoins, and bitcoin trading becomes big, they'll be filthy rich just because they found the website before slashdot did.

I'll be staying away from doing any bitcoin transactions. Humanity does not need any more undeserving elites.

It seems I can't get away from the pump-and-dump of bitcoin. It's all over the place on certain websites as a new form of spam. This is part of the pump.

The dump is when we get the first people selling into the bubble and then it's a race to the bottom as sellers can to try to beat everyone else. Those that didn't sell are known as bag holders.

I see all sorts of justification for the trading on the "exchange" which is entirely unregulated and full of wash trades and other manipulation nonsense. Why people even trust the market is beyond me. It's trades in a vacuum - based entirely on the greater fool theory of value. Just like tulips. But with tulips, if you are starving, at least you can eat them. You can't eat bitcoins.

The above doesn't even take into the account the fucked up economics of bitcoin. With built in deflation, if this was ever adopted as a real currency, the dumbest thing you could ever do is take out a mortgage in bitcoins for a house, even at a rate of 0 percent interest. Proof of built in deflation is that there are roughly 21 million bitcoins maximum, that if they become a valid currency, become fewer and fewer (they can be destroyed and gone forever) while chasing more actual goods and services as economies grow. This benefits hoarders and nobody else. Deflation is bad. It gums up the works of functioning economies, like sand in the gears of a transmission.

But that's if it ever becomes viable. There are no advantages to it at all beyond what we have right now for electronic transactions. Even the most credit-unworthy can waltz into a bank and get a secured credit card and be protected from online fraud in purchases or if the card is stolen. Bitcoins give you no such protection. If your bitcoins are stolen or you are defrauded, they are gone for good. It's as if you've used a debit card over the net.

I see no advantages. Only pitfalls.

This is so unworkable that it must be for another purpose entirely - money laundering. Make successive wash trades (illegal in real exchanges like NYSE, Chicago, NASDAQ, etc) in the market and voila, your formerly dirty money is now untraceable and "clean."

I can't wait until bank accounts are frozen and people go to jail over this. It will be delicious to watch.

I see this as being a similar false economy to the plug-in hybrid that people drive to work and charge for "free."

At this very moment, my work computer has all 4 cores pegged, generating one bitcoin every 45 minutes (except when the java periodically hangs up...) So, I'm using my employer's landlord's electricity (which my employer gets for a fixed price in the lease) to generate bitcoin. I win, but ultimately, somebody else is paying the price.

Really, it's the landlord's own fault, the air-conditioner is from the 1960s and only has one setting which results in about 64F at my desk, if I weren't generating bitcoin, I'd be doing un-necessary FPGA compiles to keep warm.